Financial stability is at risk from big tech companies: RBI

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The Reserve Bank of India (RBI) stated on Friday that large tech companies that provide financial services pose a risk to the stability of the financial system because of the potential for anti-competitive behaviour and a cascading effect from their intricately intertwined operational relationships with financial institutions.

The introduction of FinTech has exposed the banking system to new risks, according to the RBI’s 25th Financial Stability Report. These risks go beyond prudential concerns and frequently cross paths with other public policy goals relating to protecting data privacy, cyber security, consumer protection, competition, and adherence to anti-money laundering regulations.

Increasing disintermediation of established banks might lead to big tech startups scaling up swiftly and posing a risk to financial stability, the central bank said. The sources added that there could be concerns about potential anti-competitive behaviour as a result of the intricate operational links between BigTech organisations and banking institutions.

Regulators and supervisors must strike a difficult balance between encouraging innovation and controlling threats to the stability of the financial system. In order to develop universal principles for management of FinTech activities, including business and revenue models, governance, conduct, and risk management, the research noted that stakeholders including regulators, the FinTech industry, and academia need to be more actively involved.